3G and mobile Trends

While both 3G and BWA spectrum were auctioned in Q2 2010 in India, 3G players
have moved ahead with their rollouts while the BWA license holders (excluding
Bharti Airtel) are lagging behind, still evaluating and trialing TD-LTE. In
India, it has been over 18 months now since 3G services were launched. Most
metros and “A” cities already have 3G coverage. The 3G operators
in India are rolling out 3G services in smaller cities, as well.

At the end of December 2011, Maravedis-Rethink estimates that India had 16
million active 3G subscribers. We further estimate that India had 18 million
active 3G subscribers at the end of February 2012. The number is close to 2
per cent of the mobile subscriber base of 911.7 million (as reported by TRAI)
at the end of Feb 2012.

We expect the active 3G subscriber base in India to reach 74 million by the
end of 2013 and 371 million by the end of 2017. The market share growth will
depend on how fast operators can deploy 3G networks in their respective
licensed circles, and how rapidly they can address the demand in rural areas.
The years 2012 - 15 will be the take-off period for 3G. Beyond 2015, TD-LTE
will have created a strong foothold in India's 4G market.

TD-LTE

In India, the major BWA spectrum holders like Reliance Industries Limited
(RIL) and Aircel are still conducting TD-LTE trials and testing equipment.

At the end of March 2012, Aircel was yet to finalize its choice of
infrastructure suppliers for the rollout of its TD-LTE network. According to
unconfirmed reports, RIL has decided to make Nagpur-Maharastra the hub for its
4G operations.Trials are set to begin for services at the RIL complex in
Jamnagar in Q2 2012.

The other state carrier, BSNL, is yet to make an official statement on whether
to embrace TD-LTE or not. For BSNL, WiMAX has been largely a failure. The
operators' plans to roll out WiMAX using a franchisee model flopped over
procedural, legal and other punitive charges. The operator is currently
focused on better rollout and consolidation in the 3G space and does not want
to stretch itself in the WiMAX domain. BSNL, as the only company which ended
up adopting the WiMAX platform in India, was also confronted with the
possibility of isolation from an interoperability and roaming perspective.
BSNL's proposal for the surrender of BWA spectrum means the end of WiMAX in
India.

At the end of May 2012, Bharti Airtel had launched TD-LTE commercial networks
in Kolkatta and Bengaluru in India. Despite these first 4G launches,
Maravedis-Rethink does not expect huge uptake of TD-LTE services before the
end of 2013.

We estimate India will reach 0.4 million TD-LTE subscribers by the end of
2012. Our estimates are conservative, but take into account the fact that as
of the end of May 2012, Bharti Airtel is the only operator to have
commercially launched TD-LTE (and only in two circles). Other BWA players like
RIL, Tikona and Aircel are expected to launch in the second half of 2012.
Maravedis-Rethink expects to see some traction on the TD-LTE front in India in
the second half of 2013. We forecast that the TD-LTE subscriber base in India
will reach 67 million by the end of 2017.

The absence of a TD-LTE device ecosystem remains the prime barrier to rapid
growth. Operators face the challenge of bringing an inexpensive multimode
(2G/3G/TD-LTE) device to the consumer. The current prices of TD-LTE devices
(US$152 for a multimode dongle) are far too high for the average Indian
consumer. The fall of device prices to the US$50 price which an Indian
consumer can afford may take more than two years. If prices fall more slowly,
TD-LTE adoption in India may evolve even more slowly than expected.

Device Ecosystem

Devices are critical to 3G service uptake. The Indian base of customers using
3G devices is still very small. It will take several years to reach critical
mass, even though mobile operators like Bharti Airtel, TTSL, Aircel, BSNL,
Aircel, Idea Cellular and others have launched a range of devices on their 3G
networks including tablets, USB dongles, smartphones and featurephones.

At the end of 2011, featurephones still dominated the total installed base of
3G devices in India with an estimated 70% market share. USB dongles had 26%
market share, smartphones and tablets 3% and 1% respectively.

On the TD-LTE front, multimode devices that support 4G as well as 3G and 2G
technologies will enable TD-LTE to take advantage of the 3G and 2G ecosystems.
Eventually, this will create economies of scale to enable a broad choice of
broadband wireless devices at affordable price points for Indian consumers.
However, as discussed above, it will be several years before such devices are
likely to become widely available. Although the multimode dongle
(2G/3G/TD-LTE) has already made an entry into the Indian market in Q2 2012,
prices are high, and smartphones are the stronger driver of new service uptake.

At the moment, India is primarily a voice and SMS market, but is moving
towards data with the release of 3G spectrum by the government. The data
traffic on MTNL's 3G network is increasing at 10% month-on-month. For IDEA
Cellular, data usage is going up by more than 20% every month. The average
monthly data usage per subscriber on IDEA Cellular's 3G network is 235MB.

Data Traffic Offload

In India, the 3G license holders were awarded only 5MHz per operator (compared
with 20MHz in many other markets). The 3G operators are likely to experience
increasing network congestion as 3G services are rolled out. With this in
mind, they are considering various options for 3G data offload, notably
femtocells and Wi-Fi offload.

Before that point, operators know there will be more and more traffic growth
on their networks in the days to come. They are actively seeking other
solutions to the problem of 3G data surge, especially while femtocells remain
expensive, including data traffic offload to Wi-Fi networks.

For instance, in Q1 2011, Aircel launched 50,000 Wi-Fi hotspots around India
and formed partnerships with Wi-Fi players like O-Zone Networks and Tikona
Digital Networks (TDN) to offer public Wi-Fi services to its subscribers.
Maravedis-Rethink expects more deployments of 2G and 3G mobile data offload to
Wi-Fi within India in the coming quarters.

Indian operators like Tikona and Zylog providing broadband wireless services
in the unlicensed frequency bands (2.4 GHz and 5.8 GHz) are expected to play
an important role in 3G data offload. These operators aim to become partners
for the various 3G players who will reach capacity exhaustion in the coming
quarters, providing the Wi-Fi infrastructure to carry excess loads.

Some Questions Answered by This Report

What is the current status of 3G in India? Why has 3G technology adoption
been slower than anticipated?

How many active 3G subscribers did India have at the end of 2011? What is
the 3G subscriber market share by operator as of Q4 2011?

What are the 3G subscriber market share projections by operator in India
by the end of 2012?

What are the various opportunites presented by 3G in India?

What is the backhaul strategy for 3G and emerging 4G operators in India?

What kind of devices are being offering on various 3G networks in India?
Who are the vendors and which models have been launched?

Which new 3G devices are expected to be launched in India in the coming
quarters?

What is the current 3G device breakdown by the form factor, USB dongles vs
tablets vs smartphones vs featurephones?

How is the 3G device breakdown by form factor expected to change by the
end of 2017?

Where do the 3G operators stand today in terms of network coverage in
India?

What are the various challenges 3G operators face in India?

How has the data traffic grown on 3G operator networks so far?

What are the most traffic consuming applications in India?

Which are the vendors bagging the most 3G infrastructure contracts in
India?

What is the monthly data usage per subscriber per month on various 3G
operator networks'?

How is 3G mobile traffic expected to evolve in the coming years in India?

What are the various options that 3G operators are exploring for the 3G
data offload? Which traffic offload options suit better for the Indian
operators and why?

Which operators have commercially launched TD-LTE in India? What are their
4G TD-LTE plans going forward?

What are the prospects for TD-LTE? How big will the market be and when
will it take off?